Microsoft, Google, Amazon Entertaining $10 Billion Spotify Purchase…

Would you pay $10 billion for Spotify?

Earlier this week, sources pointed to efforts – by major labels – to sell Spotify for as much as $10 billion, with a 20% cumulative equity interest motivating the effort. Now, according to more sources talking to Digital Music News, Microsoft, Google and ‘possibly Amazon’ are all entertaining the idea of buying Spotify, though $10 billion could be considered an aggressive ask.

‘We’re just f*&king’

Telecommunications companies were initially tipped as prospective buyers, though they may not be the marrying type. Initial sources pointed us to acquisition interest from major telecommunications and mobile giants, though additional sources have since poked serious holes in that intel. One reason is that major mobile companies already have music applications on their decks, which makes a purchase a bit superfluous. That said, alliances between mobile companies and music services continue to commence, with AT&T+Beats and Sprint+Spotify just two examples in the US alone, with plenty of other alliances sprinkled across Europe, Asia, South America, and Australasia, and beyond. That suggests that the best strategy for telecommunications companies might be ‘casual dating,’ especially given the inflexibility and limited upside that comes with a multi-billion purchase. Additionally, technologies and delivery methods can change dramatically in just a few years, making ownership a dicey bet. Against that backdrop, one source pointed to Verizon as a company actively seeking an alliance with a major music service, especially in the wake of Sprint+Spotify. That raises the possibility of a deal with any number of smaller but highly-competent services, including Rhapsody, Deezer, and Rdio, with Deezer a particularly attractive target given its extensive experience linking with telecommunications companies (Orange, Tigo, etc.)

The Lumbering Elephants: Microsoft, Google, Amazon

That shifts the discussion to mega-companies like Microsoft, Google, and Amazon, all of whom are struggling to compete in the streaming arena. Google’s Play Music All Access remains over-named and underused; Amazon’s Prime Music is just starting as consumers migrate away from downloading, and Microsoft’s streaming efforts are perennially underachieving. Enter Spotify, which actually has traction with 10 million paying subscribers, not to mention 40 million active users and a nearly-ubiquitous presence among music listeners. That makes an acquisition attractive, as it would offer one of the larger players an instantly-competitive streaming solution overnight, and a seriously potent weapon against Apple and its just-acquired Beats.

‘Funny, I thought you just said $10 Billion.’

That said, the usual elephantine suspects have been balking at a double-digit billion price tag, according to our sources, and Spotify may lack the leverage to pull it off. “A big problem is the IPO [initial public offering] market,” one source relayed. “Everyone thinks that Spotify can’t go public successfully, so that limits their options and price.” “This isn’t WhatsApp,” one source relayed after seeing the $10 billion target. “The price would be more like $5 billion.” May 5, 2014: Spotify’s Wall Street Window May Have Disappeared Enter superstar investor Fred Wilson, who pricked the balloon on overvalued IPOs with one single blog entry last month. “The combination of sky high valuations, equally high burn rates, and a disappearing IPO market is not a pleasant one,” Wilson conceded. All of which is exacting serious downward pressure on Spotify’s negotiations. “So now if you are buying, you are not competing against Wall Street,” the first source noted.

Motivated Sellers.

That puts some strategic pressure on Spotify, whose investors and stakeholders are apparently growing antsy to sell. That includes the major labels, who feel the time is now to dump this thing, and make multi-billions in the process. “They negotiated big shares in exchange for licensing because there’s more money in that,” a separate source told DMN earlier this week. “But they have to sell it.” June 9, 2014: Artists Will Receive Nothing from the $3 Billion Beats Acquisition, Sources Say… Sadly, artists will receive nothing from any upcoming sales, thanks to contractual clauses (or lack thereof) that effectively exclude them from any percentages.

And… Songza?

There’s another dangling piece in this puzzle: Songza, the playlist-happy service apparently being looked at by Google. Earlier, rumors pointed to a possible purchase by Google, though sources to Digital Music News are calling that chatter ‘mostly bulls*!t’ and conjecture. Songza has nearly $7 million in capital invested by an all-star cast, with Amazon a key equity owner. More as it develops…Pictured: 10 billion dinar note from the former Yugoslavia (public domain). Written while listening to Laidback Luke.

“Coldplay sold like 320K first week. Are they even over half a million? Arguably the biggest rock band in the world”

Coldplay is the biggest rock band in the world? 🙂 🙂 🙂

Come on, 320k first week is niiice for a band like Coldplay.

“then championing YT the next”

I swear I won’t do it anymore if YouTube is going to force artists to upload everything we’ve got.

But it’s a fantastic site right now. You can use it for non-cannibalizing previews only, it’s growing like crazy, and everybody’s there. It’s the Haight Ashbury of the 2010s, so expect it to self-destruct any day.

Uh…yes, in terms of current rock band. What other current rock bands can consistently play world tours like Coldplay does? Radiohead, Muse maybe, some others. Coldplay is up there. I’m almost positive all their last records have sold over 10M to date, even the last one is probably close to that. So for them to only sell 300K in THE MOST IMPORTANT WEEK*, that’s not impressive at all. And you know it, quit avoiding the truth to try and prove a point.

Ok, well I have no idea why you wouldn’t call them rock, but fine, to appease your arguing for the sake of arguing I’ll call them pop. And for non-current band, they get an awful lot of play on Top 40 radio…

Also, nice try on those stats, but fail. Coldplay didn’t tour substantially in 2013, but they did in 2012, and guess what? Number 5 grossing tour behind old lady Madonna, old guy Bruce Springsteen, old guy Roger Waters, dead guy Michael Jackson, and right in front of young lady Lady GaGa.

Sure, I am a middleman in a sense. So is about 99.9% of the worldwide workforce when you think about it. I support 100%, and make a good amount of money FOR people who create many things of quality. What do you do? Another “genius” toiling in obscurity because the world is out to get you, I’m sure…

Also, if you think the idea of streaming/cloud storage/etc is over, you might be one of the stupidest people alive. Talk to literally any company in any industry that exists substantially online and/or has large digital elements, and ask them their industry is shifting.

Well, depends how shitty your business team is. Ultimately, sure, the bands’ music is the thing generating any income; I would never deny that. And any artist I work with is free to leave me anytime; I don’t have oppressive contracts and they have access to any and all financials related to their band. But the fact that none have seems to me to indicate that they can’t do a better job, or at least have no desire to try, at getting syncs and/or dealing with a publisher, booking gigs and festivals/negotiating guarantees/securing advances and/or dealing with an agent, planning travel, getting press and/or dealing with a publicist, dealing with PROs, dealing with distributors, approaching labels, radio promo, and generally using my relationships to get everything from free use of $3k guitars to getting paid to remix songs.

But yes, as a songwriter (at least I think this is you), I’m sure you think you should be swimming in a Scrooge McDuck vault of money if it just wasn’t for those pesky suits, so you do have 3 options; get a team that doesn’t go all Colonel Parker on you, realize having people work for/with you can be extremely beneficial and they should be compensated as such (negotiate whatever you want), or honestly, fire everyone and do it all yourself! I know a couple artists who hire people on a need basis, and otherwise go it on their own. They do ok…

It would be naïve in the extreme to suppose that one business (e.g. Google) wouldn’t buy another business (e.g. Spotify) just because they already own a similar business. Quite apart from the scope for rationalisation and economies of scale, if you buy your competition you no longer have to beat it. Buying out the competition is a classic tactic of monopolies through the ages, which is why modern competition/antitrust authorities view takeovers and mergers with suspicion.